Modeling Work Group Discussion Points

1. Modeling Work GroupDiscussion Points MWG Meeting August 01, 2011 Web Meeting

2. Proposed Agenda • Welcome and business Tom Miller-WECC Staff • SWG-Transmission Team Heidi Pacini • MWG Progress Report to TAS (Aug-8-9) Tom Miller • Hydro Sensitivities • COI Assessment & Modeling AC/DC • Demand-side Modeling • CO2: CA Cap and Trade • Trouble-shooting COI Flows Discussion • Draft- CO2 Reduction Sensitivity Discussion • Review regional “Hurdle-rates” Discussion • Other? • Next Meeting Tom Miller

3. Proposed Agenda • Welcome and business Tom Miller • Modeling Southern California Thermal Discussion • New- Modeling California Cap and Trade Discussion • Nomograms Discussion • Northern California Hydro comparison Stan Holland • NWPP Surplus Stan Holland • Other? • Next Meeting Tom Miller

4. CO2 Reduction SensitivityDraft TAS-Modeling Working Group August 1, 2011

5. Carbon Policy • Western Climate Initiative: is a group of Western States with common goal of CO2 reduction • WECC Region: Arizona, British Columbia, California, Montana, New Mexico, Oregon, Utah, Washington • CA Assembly Bill 32 (Global Warming Solutions Act): Establishes first program of regulatory and market mechanisms to achieve reductions of greenhouse gases (GHG). • Implementation: CARB Expectation: $10/ton auction reserve price starting in 2012 at 5% real +CPI. • This implies a change in dispatch between coal and gas units in about 25 years, assuming 2% cpi and current fuel prices and heat rates. • In 2022, the CO2 tax would be ~20$/ton ( the tipping point is ~50$/ton which would happen in 2038 ). Economic effects are same as consumption tax so prices don’t change just the quantity consumed

6. Impact of California Cap and Trade • CA is an island in the WECC Ocean so generators located there will be subject to a fuel cost adder appropriate to its fuel and imports across interties (WOR, P59, COI, PDCI) • CO2 Cost Adder for CA Imports: • Unspecified Resource: .435 metric tons/MWh about 8215 mmbtu/MWh on NG • E.g. LADWP Intermountain Coal: .95 metric tons/MWh • SB 1368 Coal Imports (2020): 1100lbs/MWh higher Base Load (contract term no longer than 5-years at 50% capacity factor) • Estimating both coal and gas tax rates / MWh for these applications to be done using appropriate data in the TEPPC 2020 base case. • Renewable Imports: renewables are “must-take” in the simulations. So, renewables designated to CA as imports will be used to post-process estimate/adjust CA imports

7. 2022 Carbon Reduction Sensitivity CA a GHG “Island” WECC-Wide CO2 Price $16/ton & $45/ton (2011 Dollars) CO2 Dispatch Cost Adder All fossil fuel plants NG and Coal fired Generators No Import “CO2 Hurdle” rate Needed • CO2 Price $16/ton & $45/ton (2011 Dollars) • CO2 Dispatch Cost Adder: • Native Fossil Fuel Generation (NG-Oil) • Firm Imports: designated CA Resources • Non-Designated Imports: • California “Unspecified” Imports:“CO2 Hurdle” rate .435 metric tons/MWh

8. Illustrative Example: Impacts to Economic Dispatch

9. CO2 Costs to $MWh • Carbon coefficient for natural gas: 117 pounds of CO2 per million BTU. • Carbon coefficient for Coal: 205 pounds of CO2 per million BTU • 1 Pound = 0.00045 Metric Tons • Natural Gas Plant: • 117 lbs/kWh X 7000 MMBtu X .00045=.369 metric tons/MWh • 369 metric tons/MWh X $10/metric ton = $3.69/MWh • Coal Plant • 205 lbs/kWh X 10000 MMBtu X .00045=.923 metric tons/MWh • 923 metric tons/MWh X $10/metric ton = $9.23/MWh Source: U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2004, Annex 2, Table A-30

10. Wrap-up and Next meeting • Wrap-up • Next meeting

11. Questions?